Countries within the Asia-Pacific Economic Cooperation (APEC) body will face slowing growth next year and remain below the global average, according to an APEC Regional Trends Analysis report. This is likely to have implications for energy demand in the region.
The report was released during the ongoing APEC summit in San Francisco from 11-17 November.
Growth in gross domestic product (GDP) in the 21-member APEC body, including China, is projected to slow to an average 2.8pc next year, from 3.3pc forecast for this year, even though it has improved from last year, the report said. GDP growth averaged 2.6pc last year. GDP growth in APEC countries is expected to average 2.9pc from 2025-26.
"There are promising signs in APEC, but it is walking a tightrope amid downside risks," said Carlos Kuriyama, director of the Apec Policy Support Unit. "Economic growth in the region remains uneven though we are looking at a more stable economic growth in the years ahead."
The IMF on 7 November revised up its growth forecast for China for this year and next. But the 5.4pc growth forecast for this year and the 4.6pc forecast for 2024 are still well short of historic growth rates.
Globally, economic growth may average lower at 2.9pc in 2024, compared with 3pc this year, and average 3.2pc in 2025-26, the APEC report said.
Consumer mobility has been key to strong growth in the Chinese oil market this year, particularly road fuel and aviation sector demand. Gasoline consumption has risen by 290,000 b/d and jet fuel by 300,000 b/d. But gasoline demand growth is projected to slow next year, according to an Argus forecast and oil demand growth may hinge more on naphtha and LPG.
Rebounds in tourism and domestic consumption have driven economic activity in APEC countries, but growth is uneven across these countries. China's international flights have yet to fully recover, with jet fuel demand likely to remain below pre-pandemic or 2019 levels this year. But Chinese airlines are slated to operate 35 weekly round-trip flights to and from China and the US from 9 November, up from 24 in late October.
The legacy of the Covid-19 pandemic, inflation, higher debt, climate change, trade protectionism, geopolitical tensions and economic fragmentation are affecting the outlook for APEC countries, according to the APEC report.
Inflation among APEC countries declined to 3.4pc in September 2023, compared with a 6.6pc rate a year earlier. But the report also warned of an uptick in recent months.
"To fight stubborn inflation, many APEC economies have been tightening monetary policy by raising interest rates," Rhea C Hernando, analyst with the Policy Support Unit and co-author of the report said.
Inflationary pressures and the higher cost of trade finance compounded by global uncertainties have resulted in sluggish trade in the region, the report said.
China is battling the opposite, or deflationary instead of inflationary pressures, even as it eyes an increasing role for consumption in overall economic growth. The consumer price index fell by an annual 0.2pc in October and grew by just 0.4pc in January-October from a year earlier.
Shifting demographics will also pose a challenge to the region's economy with a growing older population and declining birth rates. China recorded just 9.56mn births in 2022, and the first population decline in 61 years, according to government data.
